After an deal ending a lawsuit, New Haven will have a large, for-profit drug and alcohol treatment center.

It took three years, a lawsuit and mediation by the state Attorney General, but a for-profit residential treatment center for drug and alcohol abuse is set to open as soon as this summer in a shuttered former nursing home building in New Haven.

The Retreat at Southern Connecticut will be the largest treatment center of its kind in the state, with 80 beds for detoxification and rehab. And with an investment upwards of $15 million reusing an old facility, more than 125 new jobs and a union-friendly management focused on a crisis afflicting 275,000 adults in Connecticut, you might think the route to approval would be quick and painless.

That's what Retreat CEO Peter Schorr figured when he decided to open the center, more or less the same as one that he built a few years ago in Lancaster County, Penn.

Retreat's story in New Haven reflects a contentious debate about the need for more addiction services, the nature of the epidemic, the convoluted payment system for treatment and, mostly, the stringent approval process by the state.

Schorr and his partners and employees more or less breezed through New Haven zoning approvals by early 2013. They applied for a state "certificate of need" from the Office of Health Care Access, part of the state Department of Public Health — for 105 beds, 79 for treatment and 26 for detoxification.

"We were hoping that it would be approved without a hearing," said Juda Epstein, the Bridgeport lawyer for Retreat, "based upon the epidemic of death due to opiates in the state."

There was indeed a hearing. Nonprofit providers and Yale-New Haven Hospital fought Retreat. They said the 256 beds offering the same level of treatment at existing centers, combined with some state-owned beds, were more than enough to meet demand.

Schorr and his staff argued that the existing beds were nowhere near enough. They cited calls they had made to the various addiction treatment centers, showing a dire shortage of beds — in some cases on the very same days when the nonprofit centers claimed they had beds available.

They also cited a 2012 report by the state Department of Health, which calculated that only 17 percent of addicts seek any kind of treatment. Retreat, which will take private insurance but not Medicaid or Medicare, said it would need to attract only two-thirds of 1 percent of untreated Connecticut addicts who have insurance to fill all of its beds, and that would be without any out-of-state patients.

"I'm in this field for 30 years. I suffered from my own addiction problems 30 years ago," Schorr said at the August, 2013 public hearing, "and I know what it's like not to be able to find a facility that will take me."

The opponents contested Schorr's logic and his facts. Just because there are an estimated 244,000 addicts not seeking treatment, does not mean they would check into a residential facility if more beds were available, the opponents said. Schorr argued that those very opponents had suggested in the 2012 report that there was a need for more beds.

"We'll do it," he said. In Pennsylvania, he added, "We also are a big referral source to other facilities…We became partners with everybody and we all work together."

Retreat positions itself as a high-end option, but not with the sort of opulent luxury found at treatment centers for wealthy people who can afford far more than insurance will cover. One big benefit would be an easing of the burden of overdosing addicts on hospital emergency rooms, Retreat argued, because it would offer traumatic detox treatment.

So if a guy wants to spend millions of bucks offering a private service, and he sees demand, let him do it, right?

Not so simple. The problem, as the nonprofit centers saw it, was that Retreat, by cherry-picking the patients with private insurance, would leave them with a higher percentage of patients covered by Medicaid, which pays too little to meet expenses.

Jeffrey Walter, CEO of the nonprofit Rushford Center, spoke on behalf of five treatment centers.

"The existing providers, including Rushford, depend on a payer mix that is a struggle to attain and maintain and we believe that the entry of The Retreat with 105 beds…is going to have a destabilizing effect on all of the providers," Walter said. "Even a 5 percent swing in the payer mix is going to have a devastating effect on our ability to continue to provide the quality of care that we have to provide and that the community is expecting us to provide."

It took a year, inexcusably, but state regulators rejected Retreat's application last August. The decision said Retreat failed to demonstrate a need for more beds, did not prove it would improve the accessibility of health care, did not identify a target population and did not show how it would financially strengthen the health care system.

We saw some of that same logic less than four months later when the same agency drafted a rejection of a bid by Tenet Healthcare to spend $500 million buying and upgrading five Connecticut hospitals.

Some people are saying the pattern shows a bias by the state Department of Public Health against for-profit applicants. That might be true, as the regulators in both cases shielded nonprofits from new, for-profit competitors. But with Tenet, they were worried about loss of jobs and services and with Retreat, they were worried about too much service.

In any case, while Tenet walked away in frustration, Retreat filed a lawsuit in Superior Court.

I recently met with Epstein, the Retreat lawyer, and Roy Occhiogrosso, a former top aide to Gov. Dannel P. Malloy who the company recently hired as a strategic advisor. Three days later with a trial approaching, Retreat and the state reached a settlement after months of negotiations guided by Attorney General George Jepsen and his chief deputy, Perry Zinn Rowthorn agreeing to 80 beds.

Strong support by New Haven Mayor Toni Harp helped make the issue politically important. Groups representing emergency room doctors and psychiatrists also backed the new center, though state Rep. Juan Candelaria, D-New Haven, opposed it.

Harp welcomed the deal. "Demand for this type of treatment center persists – I believe to the extent these services are available and would-be clients get healthier, pressure on law enforcement, criminal justice, and prison systems can be reduced," she said in a written statement.

Could Jepsen and Zinn Rowthorn have saved the Tenet deal? Probably not, since Malloy's chief of staff, master negotiator Mark Ojakian, was unable to broker a Tenet compromise. But a Tenet lawsuit might have made the difference.

The Department of Public Health defended its work. "DPH respects the appeal process, and appreciates the support provided by the Attorney General's Office," spokesman William Gerrish said in an email. The department, he added, decides cases "based on the criteria defined by state statute."

That's part of the problem. At a time when the state is basically broke, private investment in health care has to count for something in the approval process, which could use some tweaking in the law. Everyone will win if Retreat brings in new patients, as it says it will.

If Retreat pulls insured patients from the nonprofits, we will see a tradeoff: higher costs for taxpayers, as Medicaid payments will need to rise, in exchange for more options for insured people.

Retreat, which agreed to maintain three beds for charity care, says it will come back for permits for at least 105 beds.

"I believe they will allow more beds once we're a known commodity," Epstein said. "Maybe the state after the Tenet experiences is learning to try something different."